Helping a grandchild with a deposit

The situation

Mr and Mrs Edwards faced a perhaps well known problem: how to assist the younger generation to get their foot onto the housing ladder. In their late 60s, they had a grandson who had recently finished his degree and was now working full-time as an accountant. The grandson, named Michael, had a partner, who was now pregnant, and he was keen to set up their own home so that he could support his family.

The problem faced by Michael, which is typical of those who have just gone through university, is that he had next to no savings: his funds had all been drained during his time studying for his degree. With property prices seemingly ever increasing, Michael saw no way for him and his girlfriend to save for a deposit and buy their first house.

Potential solution

Mr and Mrs Edwards were keen to assist Michael and his partner in any way that they could. This led to them arranging to meet with a financial adviser to discuss the potential solutions that may exist. Early on in conversation, the financial adviser revealed that there were mechanisms that would allow the Edwards to gift Michael his inheritance early.

The Edwards property was unencumbered meaning that there was a total of £300,000 equity. This allowed the couple to release £20,000, tax-free, and to gift this to Michael. This meant that not only was Michael able to purchase his first property, he was even able to buy one in his most desired location: close to his parents and grandparents.

7 years later

The Edwards spent the first few years of their retirement with their state pensions, as well as a small private one. Having had an insight into the benefits that equity release could bring, they decided to arrange a further meeting with a financial adviser. This time it was about them and being able to create a retirement that they could enjoy.

By the time the Edwards had returned to the adviser, the value of their property had already increased again. They were able to access a further £30,000 in the form of a drawdown. The position now is that they can access the funds as and when they want to. In terms of any interest payments, this only applies to the money that they spend.